Whilst financial liberalisation is a desirable goal, it should be balanced against an appreciation of all economic factors both domestic and global, according to the Governor of the Central Bank of Barbados, Dr. Marion Williams.
“Financial liberalisation…is important to allow us to effectively integrate ourselves into the international landscape,” Dr Williams told the Barbados Chamber of Commerce. “With respect to CARICOM, it is a critical factor in the effective functioning of the CSME to which we are all committed.”
She continued: “Capital account liberalisation is the most important aspect of financial liberalization and from the experiences of other countries there are some lessons to be learnt.”
“Firstly, it should take place in a context of sustainable macroeconomic and trade policies so as to minimise risks."
“Secondly, developed financial systems and supervisory infrastructures need to be in place before complete opening of the capital accounts. The broad lesson is that financial liberalisation in general is likely to succeed if it forms part of a coherent programme of economic reform, and the financial sector should be opened when the economy is able to cope with the adjustment.”
However, Dr Williams was keen to stress that this process would not affect the country’s fixed currency peg to the US dollar.
“Let me say up front that this discourse will not discuss our exchange rate regime as there is sufficient evidence to confirm that for small developing economies fixed exchange rates work very well.
“Our fixed exchange rate acts as an anchor, which helps to stabilise the economy,” she argued.
The full text of Dr Williams' speech to the Barbados Chamber of Commerce on the likely impact of financial liberalisation can be found in the Tax-News Resources section.
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